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Note 7 - Leases

6 Months Ended

Jun. 30, 2021

The Company has the right of use for office and manufacturing facilities under four operating lease agreements and for equipment under one operating lease agreement with initial terms exceeding one year, and has two operating lease agreements for manufacturing facilities and one for manufacturing equipment with initial terms of one year or less.

The Company obtained the right of use of real estate located in South San Francisco, California, in November 2020 under a lease that terminates on September 30, 2025, with no extension option. The Company also obtained the right of use of real estate located in South San Francisco, California, in June 2015 that was scheduled to terminate on April 30, 2020, with a five-year extension option that the Company exercised in July 2019, extending the lease until April 30, 2025. Further, the Company obtained, via the Merger in February 2018, the right of use of facilities located in Alpharetta, Georgia, that terminated on February 28, 2021, with no extension option. These facilities were subleased for the remainder of the lease term effective November 30, 2018. In addition, the Company has the right of use of one facility located in South San Francisco, California, under a lease that, following a one-year extension, now terminates on July 31, 2022, with no extension options. Further, the Company has identified an embedded lease for the rental of facilities in Burlingame, California, within a Statement of Work for the manufacture of bulk vaccine product that is expected to be completed early in 2022, and short-term embedded leases for the rental of facilities in South San Francisco, California and Lodi, Wisconsin.

As of June 30, 2021, the weighted average discount rate for operating leases with initial terms of more than one year was 9.78% and the weighted average remaining term of these leases was 3.81 years. Discount rates were determined using the Company’s marginal rate of borrowing at the time each lease was executed or extended.

The following table summarizes the Company’s undiscounted cash payment obligations for its operating lease liabilities with initial terms of more than twelve months as of June 30, 2021 (in thousands):

Year Ending December 31,
2021 (six months remaining)	$	1,060
2022		1,986
2023		1,585
2024		1,641
2025		1,113
Undiscounted total		7,385
Less: imputed interest		(1,231	)
Present value of future minimum payments		6,154
Current portion of operating lease liability		(1,791	)
Operating lease liability, net of current portion	$	4,363

The Company presently has no finance leases and future obligations of $23,000 under an operating lease for equipment with an initial term of one year or less.

Certain operating lease agreements for facilities include non-lease costs, such as common area maintenance, which are recorded as variable lease costs. Operating lease expenses for the three and six months ended June 30, 2021 and 2020, are summarized as follows (in thousands):

	*Three Months Ended June 30,*					*Six Months Ended June 30,*
	*2021*		*2020*			*2021*			*2020*
Lease cost
Operating lease cost	$	511	$	212		$	1,173		$	401
Short-term lease cost		71		3			131			6
Variable lease cost		331		13			624			24
Sublease income		—		(55	)		(36	)		(109	)
Total lease cost	$	913	$	173		$	1,892		$	322

Net cash outflows associated with operating leases totaled $886,000 and $237,000 in the three months ended June 30, 2021 and 2020, respectively, and $1,820,000 and $474,000 in the six months ended June 30, 2021 and 2020, respectively.